Phillipson v. Board of Administration

• Decision Date: 26 August 1970
• Citation: 89 Cal.Rptr. 61,473 P.2d 765,3 Cal.3d 32
• Court: California Supreme Court
• Parties: , 473 P.2d 765 Rose PHILLIPSON, Plaintiff and Appellant, v. BOARD OF ADMINISTRATION, PUBLIC EMPLOYEES' RETIREMENT SYSTEM, Defendant and Respondent. L.A. 29698.

Page 61

89 Cal.Rptr. 61

3 Cal.3d 32, 473 P.2d 765

Rose PHILLIPSON, Plaintiff and Appellant, v. BOARD OF ADMINISTRATION, PUBLIC EMPLOYEES' RETIREMENT SYSTEM, Defendant and Respondent.

L.A. 29698.

Supreme Court of California In Bank.

Aug. 26, 1970.

Hennigan, Butterwick & Clepper, J. David Hennigan, Riverside, Kaufman & Wagner, and Marcus M. Kaufman, San Bernardino, for plaintiff and appellant.

Thomas C. Lynch, Atty. Gen., Harold B. Haas, Asst. Atty. Gen., Edward M. Belasco, and William L. Zessar, Deputy Attys. Gen., for defendant and respondent.

Bertram McLess, Jr., County Counsel, Joseph Kase, Jr., San Diego, Roger Arnebergh, City Atty., Los Angeles, Paul B. Pressman, Deputy City Atty., and Arthur E. Babbel, Sacramento, amici curiae on behalf of defendant and respondent.

TOBRINER, Justice.

In 1966 plaintiff Rose Phillipson obtained an interlocutory decree of divorce from her husband, Nicholas Phillipson, which decree awarded her, among other property, the funds accrued to Nicholas's retirement account during his employment by the state. Defendant Board of Administration of the Public Employees' Retirement System refused to pay over the sum credited to Nicholas's account, and plaintiff brought this present action for declaratory relief. The superior court entered judgment for defendant, and plaintiff appeals.

We hold that both accumulated contributions of married employees to the Public Employees' Retirement System, and matured retirement benefits allocable to those contributions, are community property, and as such are subject to division and award in an action for divorce. The award of that interest to the non-employee spouse lies within the power of the superior court; it does not violate the prohibition against assignment of pension rights contained in Government Code section 21201. Finally, we hold that when the court renders an interlocutory judgment of divorce after the employee has terminated state service, but before he has elected the form of retirement benefits, the divorce court has jurisdiction to require that benefits be cast in whatever form is most useful to the community. We therefore uphold the award to plaintiff of the accumulated contributions credited to the retirement account of Nicholas Phillipson.

Nicholas Phillipson was employed by the State of California as a cook at the California School for the Deaf from 1955 until he left state employ on April 1, 1966. As a state employee, he had contributed the required amounts to the Public Employees' Retirement System; as of July 31, 1967, the date of the commencement of the present action, his accumulated contributions, plus accrued interest, totalled $4,532.66.

On April 14, 1966, plaintiff, his wife of 22 years, obtained an interlocutory decree of divorce on grounds of extreme cruelty. ¹ The decree awarded plaintiff, among other property, ² 'any State Employees Retirement System Funds, which have accrued to the credit of defendant by reason of his employment as a Cook at the California School for Deaf at Riverside, California.' Nicholas Phillipson did not contest the divorce nor appeal from the judgment.

By filing a formal application for retirement with the board of July 19, 1967, Nicholas Phillipson elected to receive a pension for life. On July 31 plaintiff instituted the instant action in order to obtain an adjudication that she owned the funds in Nicholas's account with the Public Employees' Retirement System, and to enjoin the board from approving Nicholas's application for retirement benefits. She named and served Nicholas and the board as defendants. Nicholas did not appear and his default was entered; the board answered, asking that plaintiff take nothing by her action and that Nicholas be adjudged the owner of all funds on account with the system. The parties submitted the matter on the documentary evidence. The trial court entered judgment for the board; plaintiff appeals.

1. Defendant board has standing to contest plaintiff's claim.

Plaintiff initially contends that the board occupies the status of stakeholder, with no independent interest in the subject matter of this action. In Ogle v. Heim (1968) 69 Cal.2d 7, 13, 69 Cal.Rptr. 579, 582, 442 P.2d 659, 662, however, we noted that 'pension administrators * * * have a substantial and abiding interest in maintaining the integrity of their funds and assuring eventual security against profligacy and misfortune.' (See Thomas v. Thomas (1961) 192 Cal.App.2d 771, 785, 13 Cal.Rptr. 872.) The Public Employees' Retirement System would be seriously hampered if the board were subject to monetary judgments rendered in default proceedings to which the board had not been joined as a party and accorded no opportunity for contest.

The standing of the board, however, narrows to the limited function of raising the issue of the power of the superior court to award Nicholas Phillipson's retirement benefits to plaintiff. Since Nicholas did not appeal the divorce decree, that decree has now become res judicata; hence, whether the divorce court should have awarded the retirement benefits to plaintiff does not concern us; we ponder only the question of the court's legal authority to render that award.

2. Monies contributed to the Public Employees' Retirement System, and benefits payable are community property.

State employees and other governmental employees who are members of the Public Employees' Retirement System (see Gov.Code, § 45345) must contribute a portion of their salary to that system. On retirement, the member can elect to withdraw his contributions (Gov.Code, §§ 20393, 20652) or he can choose from among several pension programs. If he selects a pension, the amount of the pension is fixed not by the balance in his account, but by a formula which weighs the length of service in state employ, his rate of compensation, his sex, and his age at retirement. (Gov.Code, § 21251.1.) Under this formula, the actuarial value of the pension amounts to at least twice that of the member's contribution, with the difference funded by state contribution.

The salary earned by an employee during marriage, of course, is community property (Civ.Code, § 164, now § 5110 ³). Likewise, both retirement contributions withdrawn from that salary and employer contributions added in consideration of employee services constitute community property. ⁴ In Benson v. City of Los Angeles (1963) 60 Cal.2d 355, 359, 33 Cal.Rptr. 257, 259, 384 P.2d 649, 651, in discussing the pension rights of a municipal employee, we stated that 'pension rights which are earned during the course of the marriage are the community property of the employee and his wife.' ⁵ French v. French (1941) 17 Cal.2d 775, 778, 112 P.2d 235, declared that the pension payable to a retired member of the United States Navy was community property. And directly on point, Crossan v. Crossan (1939) 35 Cal.App.2d 39, 40, 94 P.2d 609, held that the accumulated retirement contributions of a state employee were community property. ⁶

3. The superior court in a divorce action may properly exercise jurisdiction over matured pension rights of an employee in the Public Employees' Retirement System.

Williamson v. Williamson (1962) 203 Cal.App.2d 8, 11, 21 Cal.Rptr. 164, 167, summarized the law as follows: '(P)ensions become community property, subject to division in a divorce, when and to the extent that the party is certain to receive some payment or recovery of funds. To the extent that payment is, at the time of the divorce, subject to conditions which may or may not occur, the pension is an expectancy, not subject to division as community property.' ⁷ On leaving state employ, Nicholas Phillipson enjoyed an immediate and unconditional right to withdraw his accumulated contributions plus interest (Gov.Code, §§ 20393, 20652); since he had reached the age of 55, and had accumulated contributions exceeding $500, he also possessed an unconditional and vested right to a pension. (Gov.Code, §§ 20393, 20652, 20951, 21251.1.) Consequently his pension rights, having matured, were 'property' subject to the jurisdiction of the court. ⁸

Defendant and amicus City of Los Angeles argue that the board did no more than enter into a contract to pay over the accumulated funds, or a pension, to Nicholas; they contend that the only community property interest of the Phillipsons, and thus the only interest that the divorce court could award plaintiff is the right to enforce that contract. To require payment direct to plaintiff, they argue, would be to reform the contract.

In discussing this argument, both parties rely on Benson v. City of Los Angeles, supra, 60 Cal.2d 355, 33 Cal.Rptr. 257, 384 P.2d 649. In that case August Benson had worked for the city from 1916 to 1940, when he retired on a pension. He married Teresa in 1920. They were divorced in 1952; the divorce judgment did not attempt to dispose of property interests. August married Olive in 1953, and on his death both Teresa and Olive claimed a widow's pension.

The court upheld the award to Olive in the following language: 'Conceding the community nature of the pension, it follows that the community possessed only such an interest therein as August's employment contract provided. * * * That contract provided for payments to August during his lifetime and thereafter for the payment of benefits to August's 'widow.' Certainly if August had married and divorced several wives during the time he was employed by the city, each former wife would not be entitled to a widow's pension. It is apparent that the contract between the city and the community did not contemplate multiple or divisible pensions, but instead a pension for the member's 'widow' only. * * *

'On the face of the contract entered into between the community and the city, Teresa was not entitled to assert any personal rights other than those of the community, which were to enforce payments to August and after his death to his widow. * * *

'This is...